An Interview with Norbert Ulmer
As Director of Laboratory CAD/CAM for Sirona Dental, Norbert Ulmer sees the dwindling number of laboratories in the US as a major threat, but also as an opportunity in disguise for those who take a committed, focused, and efficient approach.
Inside Dental Technology (IDT): What is your perspective on the landscape of the dental technology industry today and some of the realities and challenges that you are seeing?
Norbert Ulmer (NU): The dental laboratory industry is experiencing tremendous changes. In the last few years, the number of laboratories in the US has declined by 30%. In contrast, the population of the US has grown by approximately 20 million over the past three decades. So with that population growth, the need for crown and bridge units has increased tremendously. According to the NADL, in 2008, the laboratory industry produced approximately 48 million crown and bridge units. In 2013, the number of crown and bridge units increased to 56 million. We have every reason to believe that upward trend will continue. When those numbers are broken down on a per laboratory basis, they become very powerful. If a laboratory on average fabricated 3,700 crown and bridge units per year previously, that same laboratory today has the opportunity to produce more than 6,200 crown and bridge units per year, an almost 70% increase in production.
IDT: How do you believe the remaining laboratories can scale up to meet this increased demand today and in the future?
NU: The biggest challenge we have is getting laboratory owners to understand that a huge wave of work is coming toward them. Some laboratories grasp the industry trends, are willing to take on that workload, and are readying their businesses to meet the increased demand. Others are still recovering from the recession and being overly cautious. For those that see the opportunity, the only answer is to adapt to and invest in scalable automated production methods.
IDT: As you see it, is this less of an option than it is a necessity if the laboratory industry has any hope of taking on this increased workload?
NU: Absolutely. Thus far, for the majority of laboratories, the motivation behind digitalization has been material driven, not vision driven. Very few entering into CAD/CAM production say, ‘I want to digitize the workflow in my laboratory.’ Most who bought into CAD/CAM have said, ‘I want to be able to provide zirconium oxide restorations.’ There is a serious flaw in basing one’s CAD/CAM business strategy on a single material as has been witnessed by the downward pricing pressure for zirconium oxide monolithic crowns. Today, those full-contour milled zirconia crowns are a commodity. Laboratories must understand the pricing structure of the market and the opportunities associated with the different materials. So when they do decide to invest in the scalable production methods needed to address the high volume of work coming toward them, they will have production capabilities that address more than handling a single material.
IDT: For laboratories that haven’t made that investment in equipment, doesn’t the ability to outsource still give them the scalability they will need?
NU: It is finally time for laboratories to start thinking in terms of business and not restorations. When we look at the changes happening right now in the marketplace, we are looking at workflow. For a laboratory that decides not to get into the digital market quite yet, but still wants to be able to provide the restorative options being demanded by clients, the workflow is dependent on outsourcing. However, that decision essentially optimizes somebody else’s workflow chain. With every product that is outsourced, those laboratories are allowing someone else to gain economies of scale. And with those economies of scale, the outsource providers will be the ones who succeed in that commoditized market. They will continue to drive down prices and establish a barrier of entry for smaller laboratories that do not have the volume and the economy-of-scale advantage.
IDT: If you look ahead to the next 5 or 10 years, how would you envision the industry ideally meeting the challenges you have discussed with us today?
NU: Different possible scenarios exist on how this may play out. One such scenario would be that, as our existing laboratory-owner generation transitions out due to retirement, their customers simply move over to a commoditized market and large service providers for lack of any other option. If that is the case, then we might end up with a handful of gigantic laboratories or groups that are providing 80% of the business.
Another scenario would be for our laboratory community to understand the vast opportunity that lies before them and apply their technical expertise and knowledge in combination with technology to provide clinical dentistry with the myriad restorative options they have today. The latter is our mission and a vision that we fully support.